RREEF has secured a KRW500 billion (€315 million; $460 million) separate account mandate from Korea’s largest insurance business, Samsung Life Insurance, to invest across the world’s gateway cities, PERE can reveal.
The Fortune 500 business has mandated RREEF to acquire core real estate in cities across Europe and North America including London, Paris, Frankfurt, Munich, New York, San Francisco, Boston and Washington, as it seeks to diversify its real estate exposure beyond its own borders.
Samsung Life is one of a number of Korean institutions seeking to diversify their asset base, others including National Pension Service of Korea, Samsung Fire and Marine Insurance and the Korea Investment Corporation. Currently many such investors have a sizeable exposure to fixed income products and equities while their real estate portfolios are largely domestic. In seeking to mitigate against demographic and inflationary risks and to locate more attractive returns than those available from real estate on home soil, such investors are looking to mature international markets.
Niel Thassim, head of RREEF in Asia Pacific said: “We’ve seen a trend of Asia capital moving beyond home markets and into Europe and North America. The initial pioneers were seeking distress but some of the more sophisticated investors such as Samsung Life are taking a much more professional approach in seeking core-style strategies for the long term.” RREEF’s mandate runs indefinitely.
The mandate from Samsung Life, the latest in a string of recent big ticket separate accounts awarded to the firm, brings the amount of capital sourced from Asia investors to more than $3 billion. Last year, RREEF obtained mandates from Malaysia’s Employees Provident Fund (EPF), $112 billion sovereign wealth fund to invest £500 million (€563 million; $824 million) into core real estate in the UK and an ongoing mandate to invest capital for Malaysia’s KWAP Provident/Pension Fund in select markets in Asia.
Typical deals executed on behalf of Samsung Life would be in the range of $200 million to $300 million in size but smaller deals could also figure. The mandate, like RREEF’s other Asia separate accounts, has been awarded on a non-discretionary basis, meaning capital outlays proposed by the firm would require Samsung’s approval first.
Capital from Asia chasing core assets in the world’s most mature real estate markets has become something of a widespread phenomenon since the global financial crisis as resource-rich investors seek relative discounts to pre-crisis valuations. But Thassim said he expected to deploy the capital despite increased competition: “There is competition for good quality real estate in gateway cities and there always will be. But we believe that gateway cities in Europe and the US, posses sufficient liquidity and transparency and we wouldn’t take on a mandate we didn’t think we could execute on.”
“Asian capital over the next five to ten years will become game changing for global real estate. We’ve started to see that. There are many institutional Korean investors, for example, as well as others from Malaysia, Taiwan, Thailand, Japan and Australia looking to invest or are investing around the world now and their cost of capital is very competitive.”